Conduct Committee findings in relation to accounting under IAS 18 and IFRS 3

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06 Aug, 2015

The Financial Reporting Council (FRC) has issued a press release of the findings of its Conduct Committee stemming from the review of the annual reports and accounts of Quindell Plc ("the company").

The principal issues included:

  • The timing and amount of revenue recognised for claims management and related services under IAS 18 Revenue.
  • The accounting for the purchase of the company by an unlisted shell company which was accounted for using acquisition accounting under IFRS 3 Business Combinations.  Following its review, the Conduct Committee concluded that the company was, for accounting purposes, the acquirer in the business combination and therefore that the transaction should have been accounted for as a reverse acquisition.
  • The accounting for share-based payment awards of an acquiree in a business combination which should have been accounted for as employee compensation rather than as part of the cost of the business combination in line with the requirements in IFRS 3.

The Conduct Committee press release serves as a reminder that revenue recognition is a continued area of focus for the Conduct Committee.  It also highlights that entities should review transactions carefully to identify the acquirer in an acquisition scenario and need to carefully assess whether share-based payment awards held by employees of an acquiree should be treated as part of the cost of the business combination or employee compensation as this can have a significant impact on the resultant accounting under IFRS 3.

Please click here for the full press release on the FRC’s website.

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